07/18/2010

Wiping Out The Middle Class

Future historians, if they are objective, will look back on the "Great" Recession and its aftermath (2007-?) as the time when America's Middle Class was largely wiped out. They will further note that the current economic catastrophe merely catalyzed a process that had been well underway in the 3 decades prior to the recession itself.

The Middle Class that arose in America in the decades after World War II has no historical precedent. America's Empire ascended with its appearance, and our fall coincides with its disappearance. This is not an accident. The United States became the largest economic & military power the Earth has ever seen in the vacuum left by the wars in Europe and the Far East. Roosevelt's New Deal during the Great Depression, World War II, and the boundless opportunities that opened up after 1945 had the effect of leveling & expanding America's wealth. Thus America's great Middle Class, aided by measures like the G.I. Bill and affordable housing, was born.

This list is not complete, and nor is it not meant to be. I have commented here on DOTE about each of these issues more than once, and will continue to do so. Go through Business Insider's 22 slides to get the grisly details. Here's #21 to give you a taste of what the list contains—

Approximately 21 percent of all children in the
United States are living below the poverty line in 2010—the highest
rate in 20 years. Source

The study, funded by the private philanthropy Foundation for Child
Development, found that families' economic well-being has plummeted to
near 1975 levels, said Kenneth Land, project coordinator and professor
of sociology and demography at Duke University.

"Virtually all
of that progress is wiped out through job losses, through declines in
real income, and other aspects of family economic well-being," Land
said.

Matthew Stagner, director of the University of Chicago's Chapin Hall
Center for Children, views the study as important but not surprising.
He noted also that some of the trends described, in terms of family
relationships and other indicators, are not necessarily caused by the
recession.

The report's prediction that indicators of family
economic well-being will "bottom out" in 2010 will depend on the length
of the recession and the state of the overall economy, Stagner said.

Bad economic times have not ended in the United States—not by a long shot. The next few years are likely to tell us how bad things are going to get. There is little chance that family economic well-being will "bottom out" this year.

The Rise & Fall of America's Middle Class poses a broader question. Was the existence of such a broad swathe of people with real wealth just an aberration? Was it just an anomaly in the greater historical scheme of things? This question is complex, and I will address it in a later post. For example, wealth & income inequality is much greater in the United States than it is in Europe or Japan, so the Middle Class in these countries is not declining at the same pace as it is in America.

Here is a 1-hour video of Elizabeth Warren talking about the coming collapse of the Middle Class. She gave this lecture on January 31, 2008. Everything that has transpired since then only reinforces her premise. It is ironic how most observers of the economy miss the forest for the trees. Unbelievably, they focus on what this quarter's GDP number will be without seeing the larger destructive trend that Warren talks about. Her presentation is long and tortuous, but she put a lot of evidence together to support her view that America's Middle Class is collapsing. I don't expect you'll watch it all at once, but perhaps you can watch it in bits & pieces.

Question 1 If american consumer spending accounts for 2/3 of the economy and corporations keep sending everything overseas to be made
and then sent back here to be purchased by the same 2/3 of the country that is making less and less money,are'nt corporations slowly killing there bussiness?

I believe it was Henry Ford who said he wanted all of his workers to make enough money so they could go buy his cars.

Question 2 Will americans ever demand products be made in america and stop shopping at the likes of wallmart?

Maybe Europe and Japan have more income equality due to the history of war and revolution there so they are more careful to ensure social stability.

Americans will have to have a civil war or revolution based on poverty like in France or Russia before such an extreme system as has developed becomes tabu (like a strong currency is aboslutely necessary in Germany due to perceptiopn of inflation bringing down Weimar Republic for example). Maybe American system is more based on innovation, immigration and change. There are fewer stable markers on the landscape in terms of general culture. So change is just accepted. Move on to the next place or job (California, the Burbs, etc.) Microwave pizza is maybe ok in America whereas the french reject it. So technology or change to say credit cards and Wal Marts is ok to people. Americans accept all sorts of revolutionary change as normal. Maybe due to the radical technological changes in computers and transport and advertising all the things Elizabeth Warren notes were possible (medical care increasingly expensive due to technological "progress", credit cards possible due to computerization of banking, cheap goods from China due to containerization and globalization and Wal Mart. Exurbia due to cheap oil.)

I suppose that the middle class only came into being due to excess energy from Texas oil fields enabling cars and suburbia and everybody to have a house. Otherwise it would have been tenements forever. When Texas oil was most gone they had to buy it more expensively from the Arabs and USA went downhill from there.

This website sums it all up (http://americadeclines.com/). We used to be the maker of the worlds goods and services where people, local governments, local business all thrived due to the influx of money from people across the globe who wanted to buy what we made. We imported money and wealth and exported our goods/services. Now the same towns that used to be thriving when we 'made things' and had a middle class are npw dilapidated, the people who live there in poverty, and our money now flows overseas (transferring our wealth at an alarming rate to China, India, etc.). Yeah, outsourcing is good - what geniuses! But then again, if I were getting paid millions to say that like they are, I might too. Here is what America looked like before politicians allowed the raping of our country in exchange for campaign contributions from corporations. I hope our lost industrial might doesn't come back to us from a hostile country (remember - we won both WWI and WWII based on having a strong industrial base). No longer - perhaps if we get into a long/protracted war now, we can intimidate them with our insurance contracts or threaten to sue... Wake Up!